Buying a Business in Charleston South Carolina?
Key Questions in life start with Who, What, When, Where, Why and How? When it comes to buying a business it is no different.
How should I Buy a Business ? Clearly you can do it yourself. However, a professional Business Broker knows how to keep the transaction Confidential from the Sellers employees, customers and competitors which is very important to both the Buyer and Seller. We know how to deliver the key services you will need in dealing with Sellers to provide you with all the information you need to select the right business. Therefore, we recommend that you use a professional Business Broker.
Why use a Business Broker?
- Saves you time & money.
- Maintain confidentiality.
- Educate you and walk you through the entire purchase process.
- Offer advice and consultation.
- Present the facts to you regarding your opportunities.
- Professionally handle negotiations.
- Coordinate the transfer process.
- Offer large number and variety of businesses.
- Provide experience.
- Bridge the gap between you and the seller.
Why Use Sunbelt 's Network of Business Brokers?
Bottom Line : We are the only Brokerage with the Local, National & International reach to attract a wide variety of Sellers for you to have a good selection from all over the world. We assist you in negotiating the large number of Business Brokerage websites with so many duplicate and inconsistent listings. That means we can help you find the right business faster and at a fair competitive price.
There are (8) eight significant advantages to buying an existing business versus starting a business.
- You can review actual operating results rather than projections. If a business has been owned and operated by the same owner for a number of years and if that business has been the source of income for his family, you can be reasonably sure that the business is profitable and viable.
- Immediate cash flow. No expensive advertising to lure customers - the cash register starts ringing the first day you take over, just like it did the day before for the seller of the business.
- Trained employees in place. When you take over the business, you will have a complete crew of trained employees to run the business. No down time for training and no customer dissatisfaction with untrained employees.
- Established suppliers and credit. For the most part, the existing vendors will continue to do business with you without missing a beat. Remember that they have been supplying the business for a while and they know it is a good business. They don't want to lose your business, they want you to succeed and buy more goods and services from them!
- Established customers and referral business. Your customer base is already in place and it will, through referrals, continue to grow - unless you drive them away.
- Existing licenses and permits. In many cases, all you have to do is transfer the licenses and permits to your name. In those cases where you have to re-apply for a license or permit, you have the comfort of knowing that the business, in its current location, was approved for the license or permit (for example, a liquor license for a restaurant).
- Training by the seller. In addition to the trained employees, you will receive training from the seller in how to operate the business. You will be introduced to customers and suppliers and will get the benefit of the seller's extensive experience in running the business. You will not have to make the same mistakes the seller made!
- The availability of owner financing. Over 90% of the businesses sold by Sunbelt Business Brokers have a portion financed by the seller of the business. The seller who finances your purchase of his business has a vested interest in your success.
Clearly, the best solution to finding a way to provide for you and your family is the purchase of an existing business. Another good avenue is the purchase of a franchise. However, franchises are generally more capital intensive than the purchase of an existing business. Most existing businesses are purchased with a cash down payment ranging from 15% to 50% of the total purchase price. In start-ups and franchise purchases, the cash requirement can reach up to 100%. Even when financing is available in these situations, the terms and conditions of the third party financing are generally much more stringent than the terms offered by the sellers of privately owned businesses.
Fundamentals of buying an existing business:
- Buy a business you like.
- Don't expect "traditional" financial information from the owner of a privately owned business.
- Tax returns of a privately owned business are prepared to show as little income for tax purposes as possible.
- You and the owner of the business should like each other.
- Commercial banks won't lend you the money to purchase a privately owned business.
- The owner of the business should finance the purchase.
- Don't take yourself out of cash - you will need reserves.
- You must make an "offer" before you have seen all of the financial and other business records of the business you are interested in buying.
Buy a Business You Like
Many business buyers think the most important quality in a business is profitability. Certainly, you want a business that will have sufficient earnings to provide for you and your family. BUT, you will risk making a terrible mistake if you do not BUY A BUSINESS YOU LIKE.
Suppose you find a septic tank cleaning business that makes lots of money and can be purchased for a reasonable price with great terms. Unless you want to pump septic tanks, the fact that the business makes lots of money is of no importance at all. If you bought this business because of the income, you will spend long, miserable days in the business and will end up neglecting the business and selling it later at a loss.
When you think about buying a business, think about what you like and don't like. If you fix on a particular type of business, visualize yourself running the business. Visualize taking your friends and relatives to see your business. Do you like what you see? Will you be proud to own the business? If not, or if you are not sure, don't buy that type of business.
You will have to be flexible in finding a business. If you lock onto only one type of business, it will take you much longer to find a business to buy. We like to start a buyer thinking about what they like and don't like using the following broad categories of businesses. First decide if there are any categories that you absolutely do not want to be in. Then focus on the remaining categories and review the characteristics of these categories as presented below.
- Coin operated businesses
Once you have selected a primary category, you can begin to look for a business in earnest. You will find many different businesses within each category that share the primary characteristics of the broad category. You will then have to "fine tune" your selection. For example, within the retail category, we have clothing stores, shoe stores, boutiques of all types, bicycle shops, etc. Within the restaurant category, you can choose from full service restaurants to ice cream stores. JUST BE SURE YOU LIKE IT BEFORE YOU BUY IT!
When you buy a business, just what exactly do you buy?
In almost every situation you encounter, you will be (and should be) purchasing the assets of the business. There may be instances where the seller wants you to buy the stock of the corporation he owns, which in turn owns the business. The primary reason for the seller's desire to sell stock is TAXES, DREADED TAXES!
Most privately owned businesses are owned as sole-proprietorships and some are "Sub-S Corporations" and partnerships. Some larger businesses may be owned in what is known as a "C-Corporation". Simply put, sole-proprietorships, Sub-S Corporations and partnerships are taxed as if the income went directly to the owner. Whatever income the business has is divided up among the owners and the owners file a personal tax return and report their share of the income on their personal tax return.
In a C-Corporation, the corporation itself is taxed and then, if the owner takes out money in salary or dividends, he is also taxed. Tax is paid by the corporation, AND by the owner. If the owner of the business has the business owned by a C-Corporation, the corporation will pay taxes on the gain on the sale and then, when the money is taken out by the stockholder, he will be taxed again. The sale of the assets of a C-Corporation results in double taxation of the gain. If the owner sells his stock to you, only the gain on the sale of stock is taxed - single taxation.
You will seldom run into the stock sale scenario when purchasing a business with sales of less than $1,000,000.
So, if you are buying assets, exactly what assets are you buying?
You will be purchasing the inventory, furniture, fixtures and equipment, goodwill, trademarks and tradenames of the business. Unless you specifically agree otherwise, you will be buying these assets "free and clear" of any liens and mortgages. Although you may agree to assume an existing debt as part of your purchase, you will generally not be assuming any of the existing liabilities of the business.
What about the cash and the accounts receivable? Put yourself in the shoes of the owner of the business. The cash and the receivables were the result of sales made by the owner before you purchased the business. The owner thinks, and rightly so, that the cash and the receivables belong to him. Also, the owner has to pay the existing accounts payable and other current liabilities and the cash and the receivables will probably be used for this purpose.